Redundancies predicted to increase after furlough ends

August 27, 2020 10:51 am

redundancies to rise

The Furlough Scheme

Earlier this year, the Government introduced the Coronavirus Job Retention Scheme (CJRS) in response to the coronavirus (COVID-19) crisis. The retention scheme was put in place to allow all UK businesses with employees on a PAYE scheme to designate those employees as ‘furloughed workers’ putting them on leave and allowing them to stay on the payroll, with the Government funding 80% of their salaries up to £2,500 a month, with the intention to assist businesses throughout the coronavirus outbreak and to prevent large scale redundancies.

There were additionally two main updates made to the furlough scheme following a briefing held by the Chancellor on 29th May, where it was announced there were two main changes that would take place over the following months. Under this update, there are some deadlines fast approaching that employers and employees should be aware of:

  • 10th June – this was the deadline put in place for employers to place staff on furlough leave.
  • 1st July – From this date, businesses were able to bring back furloughed employees in to the workplace part-time, this was a month earlier than had previously been announced. The amount of hours, shift-patterns and what part-time means was left to the individual business to decide and employers would be responsible to pay the wages for that time spent at work. The government confirmed it would continue to pay the remaining salary contribution of the time they were not at work (still on furlough).
  • 1st August – As of this date, employers are now responsible for their employees’ national insurance and pension contributions and any furloughed workers will continue to receive 80% of their pay up to a cap of £2,500 per month.
  • 1st September – From this date, the Government are reducing their contributions and will pay 70% rather than 80% of the salary up to the cap of £2,190 per month. Employers will be expected to pay the remaining 10% of their employees’ salaries as well as National Insurance contributions and pension contributions.
  • 1st October – From this date, Government contributions will further reduce to 60%, capped at £1,875, with employers’ contributions rising to 20% as well as National Insurance contributions and pension contributions. The scheme is expected to close completely at the end of October 2020.

Redundancy rise expected

With the end of the CJRS furlough scheme only a short time away, it is thought that several businesses will not be able to retain staff when the government support ends, as they will struggle to pay the increasing share of furloughed staffs’ wages.

According to think tank Bright Blue, the majority (58%) have been topping up furloughed employees’ wages to 100% of their usual pay. This was more likely among medium (81%) and large (79%) businesses than small firms (59%).

Just under half (48%) using the furlough scheme expect to keep all furloughed staff on the payroll after the CJRS is pulled on 31 October, while 31% expect to make some job cuts; 9% expect to lay off most furloughed staff; and 3% expect to make all furloughed employees redundant.

The report, authored by Bright Blue senior researcher Anvar Sarygulov, says: “The social distancing measures have helped to stop the pandemic from running out of control, and businesses will benefit from the recent relaxations in the two-metre rule. But the threat of a resurgence continues to trouble businesses, with business leaders more likely to believe that demand for their trade will not return to normal for some time and that their business model is likely to be permanently changed.

The government has already implemented extraordinary measures to address the Covid-19 pandemic. In the months ahead, they will have to effectively follow-up on current policies, to both contain the economic fallout from the crisis and to build the road to the recovery.”

The Bright Blue study involved an Opinium poll and was conducted between 18th and 24th June 2020. It consisted of a balanced sample of 520 business leaders in the UK across different sizes and sectors. To ensure robust sample sizes, quotas of at least 100 were applied to each business size; sole-traders, micro, small, medium, and large businesses.

The research was published as the Organisation for Economic Cooperation & Development (OECD) warned the UK unemployment rate could soar to 14.8% if a second wave of the coronavirus pandemic was to hit. The current unemployment rate is 3.9%. However, if a second wave was to be avoided, the unemployment rate could still rise to 11.7% by the end of 2020 – which would be the highest level seen since 1984.

The OECD based its predictions on the accelerating number of UK organisations cutting administrative office jobs, at a faster rate than other European countries.

Updated Redundancy Legislation

A new legislation came in to force on Friday 31st July 2020, whereby any employee that is facing redundancy following a period of furlough, will be entitled to statutory redundancy pay on the basis of their pre-furlough salary and not the furloughed amount.

The new legislation is set out within the Employment Rights Act 1996 (Coronavirus, Calculation of a Week’s Pay) Regulations 2020 (SI 2020/814) and requires employers to calculate various statutory payments, including redundancy and notice pay, with reference to a furloughed employee’s normal week’s pay.

Employment Law Advice Regarding Redundancy

Furlough leave is a relatively new concept in UK employment law and some of the rules surrounding it can be complex.  If you are currently on furlough leave, at risk of redundancy or have been made redundant, your employer is bound by certain employment laws to ensure you are being treated fairly. You may even be able to challenge the fact that you have been selected for redundancy, if for example you believe this is due to discrimination and not due to a fair or objective reason.

Our specialist employment law solicitors at Larcomes realise how stressful facing redundancy can be. Our redundancy experts are on hand to discuss your rights, guide you through the options open to you and ensure you are treated fairly throughout the process and that you receive all the money that you are owed.

You can contact our redundancy solicitors today regarding your redundancy enquiry on 023 9244 8100 for fast, constructive advice that is friendly and local.

Please note that this article is not intended as legal or professional advice. This is a general news article only and updates to the law may have changed since it was published.

 

 


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